All Forum Posts by: Nathan Gesner

It's real simple math.

Let's assume you bought it without any money down and just took over their existing loan of $4.375 at 4.28%. That would be $800,000 below asking, so it's a good deal, right?

The mortgage payment would be over $21,000 per month or $252,000 per year. I'm guessing you'll spend at least $150,000 more on taxes and insurance, which puts you at $400,000 a year in expenses for a property with a gross income of $360,000. That's a $40,000 loss per year after buying it for $800,000 below asking price and before accounting for maintenance, vacancies, capex, etc.

Here's a guide that describes what good cash flow looks like and how to analyze a property.

https://www.biggerpockets.com/blog/rental-property-cash-flow...

There's obviously value because someone built it. A small unit will be harder to sell than a 3bed/3bath home with a two-car garage, but it will sell at the right price. There's not enough information in your post to say what that may look like, but there are people looking for small units and it will increase in value over time.

I don't think you are being honest with the math.

The most expensive county in Maryland has an average rent of $2,300 for a 3-bed home. Let's assume yours is really nice and rents for $4,000.

You have an original loan of $220 plus a $125 rehab for a total loan of $345. You moved that all to your HELOC at 8.5% interest, so your payment is around $2,600. That only leaves you $1,400 and doesn't account for taxes, insurance, maintenance, vacancy, or any other expenses.

If you kept your original loan of $220 at 4.25% interest, your monthly payment would be $1100, and the $125 rehab at 8.5% would be $961 for a total of $2,060 per month. Again, even if you rented for $4,000 a month, you wouldn't have $2,000 left over after paying the mortgage, taxes, insurance, maintenance, etc.

So you aren't accounting for all your expenses, and you aren't paying off your debt. By your own admission, you are just paying interest on the $125k rehab loan. That's like not paying your $200 electric bill this month and claiming you saved $200. The truth is, the money is still owed, nothing was saved or earned, and you are just throwing money away on interest.

Here's a guide that describes what good cash flow looks like and how to analyze a property.

https://www.biggerpockets.com/blog/rental-property-cash-flow...

Never spend your last dime to purchase a property, because there will be unforeseen expenses popping up your first year. You should always have funds in reserve to handle any issues.

You shouldn't have any problem renting a basement apartment in an owner-occupied property. I'm curious why you didn't investigate this during the purchase? Call the zoning office and anonymously pose your question, and it won't be a "grey area" any more.

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If you self-manage the long-term rental, you can expect 50 hours a year. Most of that will be at the beginning/end of a lease.

If you hire someone to manage a short-term rental for you, your time requirement will be less because you have someone doing the work for you.

The easiest/best solution is to deny her request and tell her to leave. When tenants start replacing roommates, they often make mistakes and accept high-risk roommates that create problems. It's best to get them out and start fresh.

Go to GET STARTED > EVENTS AND MEETUPS at the top of your screen. You can also check meetup.com or search Facebook for real estate investment groups, clubs, or meetings in your area.

A "cosigner" is someone that is financially responsible but not an actual occupant of the rental. You want both individuals listed as tenants, meaning they occupy the rental and they are 100% financially responsible. If one of them moves out, they both move out. If one of them is late, they are both late. If one of them breaks a window, they are both responsible. It's called "joint and several liability" in the lease.

The bankruptcy isn't a deal killer if (a) it's closed and (b) they've been responsible since then.